Cryptocurrency has been a buzzword for years, but does this digital currency have a place in everyone’s financial planning? Understanding cryptocurrency like Bitcoin and Ethereum and how they work helps conscientious planners determine whether this method of investing is best for their financial present and future.
What Is Cryptocurrency?
Cryptocurrency is a modern form of bartering that takes the place of coins and paper money and exchanges currency via online accounts created with a coded string of data that represents a currency unit in the form of digital or virtual tokens. Through encryption technology, this digital or virtual currency is a medium of exchange like real-world currency but uses cryptography to operate and for security.
If two people have cryptocurrency in Bitcoin, for example, they can send and receive currency within minutes through this channel. Peer-to-peer networks known as blockchains monitor and organize cryptocurrency transactions, whether you’re buying, selling, or transferring. This blockchain works as a public financial transaction database. Every type of cryptocurrency has its own conditions that must be met before one can be rewarded with currency or have new crypto generated.
The Appeal of Cryptocurrency
An entire financial industry has grown and developed around cryptocurrency. New types of crypto are launched regularly because the interest has only grown. Investors in this realm are attracted to:
- Unlimited transfer amounts
- Secure digital assets
- Secure transactions
- Guaranteed cybersecurity
- Difficult to counterfeit
- Not subject to government control
Instead of worrying about their assets living in the digital world, most cryptocurrency investors feel confident about their online wealth and its safety.
Playing the Cryptocurrency Game
It’s not possible to hold cryptocurrency in your hands like dollars and cents, but the digital banking network of cryptocurrency allows users to see their assets online. Watching their investments ebb and flow is appealing to many, just like playing the stock market. Investing in cryptocurrency is risky and complex in a market where prices fluctuate daily.
Not every investor is built for a cryptocurrency lifestyle as a financial strategy. The price volatility of this digital market makes it incredibly high-risk. It’s smart to consult with an experienced financial advisor before putting any assets toward an unknown entity, especially one that operates completely online. Crypto is purchased with traditional currency but can also be purchased with the likes of Bitcoin in an already established digital wallet.
Get Cryptocurrency Financial Planning Support
While an account with the local bank is secure and makes sense to investors, there can be limitations. Cryptocurrency promotes its many benefits including:
- Low to negligible transaction cost
- Transactions can be made 24/7
- No limits of purchases
- No limits on withdrawals
- Free for anyone to use
- Faster than wire transfers
If you don’t understand cryptocurrency, you’re not alone. Rely on your financial advisor to guide you through this new method of managing your money. Schedule a consultation at Hollander Lone Maxbauer in Southfield, MI, to determine what methods of investing and risk-taking are right for you.
